House asks for review of Chinese bid for Unocal

July 02, 2005|By Bloomberg News.

WASHINGTON — CNOOC Ltd.'s $18.5 billion bid for Unocal Corp. suffered a setback Friday, when the House of Representatives voted to press for government review of any proposed takeover, citing concern China may gain strategic energy reserves.

The House voted 398-15 to ask President Bush to examine the bid, which topped Chevron Corp.'s $16.2 billion cash-and-stock offer. The resolution said a takeover by CNOOC would be "heavily subsidized" by China's state-owned banks and would pose a national security threat at a time of record oil prices.

CNOOC responded that it has intended all along to seek a U.S. government review. The state-controlled company said it filed a notice with the Committee on Foreign Investment in the U.S. to begin the process.

The House measure "looks like a knee-jerk reaction," said Pieter Bruinstroop, a broker at Ord Minnett Ltd. in Melbourne, Australia. "The U.S. is also trying to figure out why the company wants the assets so much. It's going to be a long, drawn-out process."

Unocal shareholders are faced with either accepting Chevron's offer, which already has government approval, or waiting for investigations that may take months in the hope of getting CNOOC's cash. CNOOC Chairman Fu Chengyu said Thursday that he will meet any U.S. government requirements related to national security to gain clearance.

The resolution was introduced by Resources Committee Chairman Richard Pombo of California and had five co-sponsors, including Henry Hyde of Illinois and Michael Oxley of Ohio. All are Republicans.

By taking over Unocal, CNOOC may acquire "sensitive" technologies for exploration, production and refining that have dual commercial and military applications, the resolution said.

"A significant portion of the CNOOC acquisition is to be financed and heavily subsidized by banks owned by the People's Republic of China," the resolution said.

CNOOC said it welcomed the House vote.

"Despite the heated rhetoric, we firmly believe the process will be fair, thorough and not influenced by either emotion or politics," the Chinese company said. "Today's resolution calls for what CNOOC has been suggesting all along, namely a thorough review of the transaction."